$275m government funding sees Holden commit to building two all-new global cars

GM HOLDEN will continue manufacturing in Australia until at least 2022 after securing $275 million in government funding and committing to a billion-dollar program based on two all-new next-generation global vehicle architectures.

Thrashed out over the past three months with the federal and South Australian and Victorian state governments, the deal secures the operations of Holden’s manufacturing plant at Elizabeth in South Australia for the next 10 years, retaining thousands of jobs and generating an estimated $4 billion in value to the national economy.

However, the future of Holden’s Victorian-based engineering and design divisions – currently with more than 1000 employees – is less certain with the switch to globalised GM platforms.

Holden chairman and managing director Mike Devereux confirmed in Canberra today that the locally developed Zeta large-car platform will not continue beyond the VF Commodore launched next year and that the company’s engineers and designers would be increasingly involved in international programs.

The federal contribution to the new deal is $215 million, with South Australian taxpayers tipping in $50 million and Victorians $10 million.

Holden’s investment remains undisclosed but Mr Devereux said the company would “directly invest well in excess of a billion dollars” on the two new vehicles – around the same money as the single 2006 VE Commodore program but in this case based on two global, rather than locally developed, platforms.

From top: Julia Gillard, Mike Devereux and Jay Weatherill.

A further $51 million in state and federal funding was also announced today, with a new $35m program to assist component manufacturers and $16m to retrain retrenched employees, including the 100-plus Elizabeth workers who will be out of work when the factory returns from two shifts to one on its assembly line by the end of May.

The latest investment does not support Holden’s engine plant in Port Melbourne, which is battling diminishing local and global demand for V6 engines.

Mr Devereux refused to divulge details of the two new vehicles, which should see the Cruze small car enter a second generation – perhaps with new derivatives such as the recently unveiled wagon or an electric version also in development – and could potentially include other vehicles based on the same Delta II architecture, including the Volt plug-in hybrid.

For Commodore, the announcement of an all-new global platform could herald a shift to a smaller vehicle than the current large rear-drive range based on Zeta, which also underpins the Holden Ute, long-wheelbase Caprice sedan and high-performance iterations from Holden Special Vehicles.

Mr Devereux would confirm only that the “two new Australian-made cars will be world-class” and “will be underpinned by global architectures from within General Motors and bring new fuel-saving, connectivity and safety technologies to Holden’s portfolio”.

While at least one of these is only in the very early stages of development, Mr Devereux said the company would consider a range of powertrain options, including diesel and electrified ‘e-assist’.

“The current vehicle (Commodore) that we produce in Australia, the architecture is not a ‘global’ architecture per se but the two new architectures that we will build in Adelaide in the second half of the decade will be off global GM platforms,” he said.

“Some of them haven’t even been designed from an architectural standpoint yet.”

Asked what this means for Holden’s design and engineering teams, Mr Devereux said: “It’s safe to say that the industry is going through a globalisation – and it has been for the past decade.

“Our design and engineering team will continue to work on things that will be built in this country, but perhaps more importantly, we will connect our design and engineering team far more directly into doing work – in an increasing role – in GM’s international operations.

“It’s not a matter of needing to, it’s a matter of General Motors wanting to retain the design and engineering capability ... So we’re going to continue to engineer and design cars in Port Melbourne.”

As GoAuto has reported, GM’s International Operations president Tim Lee said last month that the US auto giant was looking to produce a smaller, more efficient car than the current Commodore at Elizabeth once the VF Commodore comes to the end of its life later this decade.

Mr Devereux today would not comment on the future of the Commodore beyond the VF.

He also said it was impossible to guarantee company jobs in the face of threats such as ongoing global economic volatility, high exchange rates and increasing competition from emerging markets.

“If anybody could tell me five, six, eight years from now, how many cars might be sold in Australia, what the value of the Australian dollar might be, whether the Indian auto-makers – Tata, Mahindra – are selling mid-size cars, SUVs and pick-up trucks here, whether the Chinese beyond Great Wall, Chery and Geely are here, I might be able to hazard a guess as to how many vehicles Holden might be able to make and sell in this country.

“If I could tell you that, and therefore how many people I might need to employ to actually make money, I would not be running a car company, I’d being buying gold because I would be omnipotent and know things that can’t possibly be known.”

Mr Devereux defended the company’s receipt of more taxpayer funding, which comes in addition to the $39.8 million issued for the development of the forthcoming VF.

“Holden is delivering a very attractive return on investment,” he said. “We estimate the current locally built Cruze will generate more than a billion dollars of economic activity from Holden in Australia over the life of the program.

“We are very much aware that government assistance and investment in our industry comes with great responsibility, and we take that seriously.

“That’s why we are laser-focused on continually improving not only the efficiency but the quality of our operations to become a truly world-class manufacturing company.”

Prime minister Julia Gillard said the funding was “truly a strategic co-investment, not a handout” and that the government was unprepared to risk losing Holden as a local manufacturer.

“The truth is, in January this year, we were at real risk that there would be no more Holden in Australia – that we wouldn’t have Holden here producing motor vehicles,” she said.

“Now that wasn’t acceptable for me as prime minister and it wasn’t the right thing for the nation’s future. It would have been a knockout blow for manufacturing in this country given the importance of the auto industry to all of manufacturing.

“This is an industry that employs more than 50,000 people. It is central to the jobs of 200,000 others. That means that it’s a vital component of our economy and it’s a crucible of new skills and new technologies.”

Ms Gillard described it as “smart policy” that the government “shaped the future” rather than being at the mercy of the high Australian dollar, the current global economic conditions and the aftermath of the global financial crisis.

“We have taken the active decision to make sure we determine what the future is, and that future will be one in which Holden continues to make cars here,” she said.

“It will be a future of more innovation; it will be a future of high-skill, high-value manufacturing.”

The prime minister said the two new vehicles would be “cleaner and greener than the Holdens of the past” and “smart, clean cars”.